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Medical Coding News Archives

Affordable Care Act Slashes Drug Costs in First Year

March 1, 2012:

Trudy Whitehead, Clinical/Technical Editor

The Affordable Care Act saved 3.6 million people with Medicare $2.1 billion on their prescription drugs in 2011, according to a report released February 2 by the Department of Health and Human Services.

The dramatic savings on prescription drugs reflect the ACA’s requirement that drug makers discount covered brand-name Part D drugs by 50 percent starting in 2011. The act’s goal is to eliminate the prescription drug “donut hole” that so many Medicare beneficiaries fall into. In future years, the act will subsidize the cost of brand-name drugs, beginning at 2.5 percent in 2013 and rising to 25 percent by 2020. As for generics, the ACA started subsidizing 7 percent of their cost in 2011, a rate that will increase to 75 percent in 2020. By 2020, Medicare beneficiaries will be paying the standard 25 percent coinsurance for both brand-name and generic drugs, and the donut hole will be a thing of the past.

HHS calculates that the average Medicare beneficiary will save an estimated $4,200 on all Medicare services over the next decade, thanks to ACA. Those with high prescription drug costs will save much more—about $16,000 by 2021. This is good news not just for Medicare beneficiaries. With lower out-of-pocket drug costs comes greater compliance with medications, and with greater compliance comes better and more consistent outcomes.

In addition to closing the donut hole, the ACA aims to slow growth of Part B premiums and copayments and make sure that many preventive services, such as mammograms, are provided at no cost to the beneficiary. The act emphasizes increased efficiency in providing care and focuses on the quality and coordination of care, as well as reducing waste, fraud, and abuse.

HHS also notes that the ACA will reduce excessive payments to Medicare Advantage plans. Quality will be rewarded, and beneficiaries will be protected from excessive cost sharing. In the past year alone, Medicare Advantage premiums have fallen an average of 7 percent, while enrollment has shot up 10 percent. Since the ACA was passed, premiums have fallen 16 percent and enrollment has increased 17 percent.